A Risk-Sharing Bi-Level Framework for Multi-Area Electricity Markets Against Extreme Events

With the increasing frequency of extreme weather events, electricity price risk management has attracted wide attention. Considering the spatio-temporal difference of price risks, the electricity resources in different areas can be coordinatively allocated for risk management. To realize this target, the effective market mechanism is significant but seldom studied. Considering that, this paper innovatively proposes a risk-sharing bi-level framework for multi-area electricity markets (MAEMs). With the guidance of risk-related price signals, the idea of risk-sharing can be realized through the temporal allocation of interchange power to relieve the power imbalance in high-risk areas. The proposed market framework is organized at two levels, where the upper level is the market clearing of optimal interchange power based on the bids/offers submitted by different areas. The lower level conducts the risk-aware bidding strategy of each area based on price risk indices, i.e., expected locational marginal prices. Besides the novel market mechanism, several techniques are developed to provide effective support for the formulated model. Specifically, to improve the efficiency of bidding strategy formulation in the lower-level market, a new scenario reduction technique is developed by combining the Ford-Fulkerson method and the new scenario measurement index, i.e., load interruption values. Besides, the bi-level market model is cleared in a distributed manner within the analytical target cascading framework for preserving data privacy among different areas. Case studies demonstrate that our proposed market framework can effectively mitigate the price risks of MAEMs by sending more power to high-risk areas as a priority.